Europe Is Struggling in Innovation And Digital Transformation

 

In Brussels last month for the annual European Business Summit, I heard a lot of familiar complaints about the EU’s persistent failure to develop a digital economy to match that of the United States and Asia.  But with Europe’s industrial economy finally showing signs of recovery, regulators are now turning their attention back to the deferred information revolution — for better and for worse.

The EU’s latest effort, part of an overall Europe 2020 initiative, is the creation of a “Digital Single Market,” announced with fanfare at the conference.

The need for harmonization is acute.  Due largely to confusing and complex national regulations, it’s easier for Europeans to buy and sell online with non-member countries, especially the United States, which accounts for more than half of all the EU’s digital business. According to EU President Jean-Claude Juncker, only 4 percent of the Europe’s digital trade today involves companies in other EU countries.

On the one hand, Europeans are justifiably proud of the work-life balance they enforce as a matter of law, limiting hours, guaranteeing vacation, constraining employers from laying off workers even when market demand changes. France recently considered outlawing work emails after normal work hours.

As a result, the EU has yet to produce a multi-billion, game-changing, Big Bang Disruptor.

Only a few European Internet companies, such as Skype, Spotify, have even made it into the major leagues.  According to the last week’s annual report on Internet trends from Kleiner Perkins partner Mary Meeker, the fifteen most valuable Internet companies today have a combined market value of nearly $2.5 trillion.  None of them are European.  Eleven are from the U.S.; the other four are Chinese companies.

Though attendees at the Summit were loath to acknowledge it, Europe’s digital decline is accelerating.  Earlier this week, researchers at Tufts University published findings from their Digital Evolution Index, comparing countries on their “readiness for a digital economy.”

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